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Read Making a Killing

home / healthcare / in the media

Political Pulse
Jan 28, 2005

by Anthony York

Schwarzenegger convenes meeting of consumer advocates to talk about drug purchasing plans

Gov. Arnold Schwarzenegger called a meeting of drug companies, advocates and legislators Wednesday to discuss differences in the myriad prescription drug proposals that are now floating around in both legislative and initiative form.

A four-front battle has been joined, with the governor introducing his proposal in the state Senate, with bipartisan support. Meanwhile, Assembly Democrats have their own proposal, a series of eight bills, most of which are being carried by Assembly Majority Leader Dario Frommer, D-Glendale, and Health Committee chairwoman Wilma Chan, D-Oakland.

And in the initiative world, a group of advocates led by Health Access California Executive Director Anthony Wright have submitted multiple proposals for title and summary to the Attorney General's office. The Wright proposals most closely resemble the Assembly Democrats' approach. Another initiative, sponsored by Jerry Flanagan of the Foundation for Taxpayer and Consumer Rights, is a further-reaching proposal also awaiting the Attorney General's review.

The meeting called by Gov. Schwarzenegger this week, aimed at gathering advocates and interest groups on all sides of the prescription drug issue, was the clearest sign yet that the governor intends to engage on the issue of providing better access to prescription drugs for poorer Californians. It may also be a sign that he realized the issue is one of the most effective tool Democrats have in taking on the popular governor.

In a November poll commissioned by Senate Democrats, health care was one of the only policy areas in which voters said they trusted Democrats more than the Republican governor. Among poll respondents, 50 percent said they trusted Democrats on health care issues compared to 38 percent who said they have more faith in the governor.

The same poll showed 64 percent of respondents were "extremely" or "very" concerned about the high cost of prescription drugs. When asked about other health care costs or the number of Californians without any insurance, those numbers climbed up toward 80 percent.

As part of his budget plan, the governor introduced his California Rx proposal, an attempt to induce pharmaceutical companies to voluntarily provide discounts to people who make too much money to qualify for Medi-Cal, but still have a difficult time making ends meet.

The governor scored a political coup of sorts in convincing Sen. Deborah Ortiz, D-Sacramento, to sponsor his California Rx legislation, along with Sen. Charles Poochigian, R-Fresno. Other traditionally Democratic groups like the California Medical Association and the American Association of Retired Persons also joined Health and Human Services commissioner Kim Belshe in the official unveiling of the plan at a Capitol news conference earlier this month.

The governor says his plan will provide access to affordable drugs for up to 5 million Californians. And Belshe says she has already received assurances from several pharmaceutical companies that they will voluntarily provide discounts to people whose income is up to 300 percent of the federal poverty limit. Individuals with annual incomes of up to $27,930 and families of four with incomes of up to $56,500 would qualify for the program.

"Negotiations have already begun, and we already have some preliminary agreements," said Belshe.

But advocates, and many Assembly Democrats, don't think the voluntary approach will work. "I think that's the main issue," said Williams. "At the end of the day it's a voluntary approach. We want something that has more of a guarantee for California's uninsured patients. We need the hammer."

Other opponents of the governor's plan agree voluntary reductions in cost don't work. The Frommer-Chan-Wright approach would threaten companies who don't offer discounts to working poor with restricted access to the desirable Medi-Cal drug market. The approach is similar to the plan adopted by the state of Maine. In essence, if drug companies do not offer a guaranteed discount to poor Californians, the state will create obstacles for those companies when they try to sell their drugs to Medi-Cal recipients.

The fundamental rift, as of now, is that the administration believes the rate cuts should be voluntary. Advocates want the cuts to be mandatory, and want the state to use its leverage as a buyer to secure those discounts.

Supporters of the Maine approach point to a recent U.S. Supreme Court decision that upheld the legality of the plan. But the governor's office, and Flanagan, say that Maine is now having problems with their Medicaid certification. The feds are saying, in essence, that states cannot leverage Medicaid recipients to guarantee discounts for those whose income is too high to receive Medicaid. Medicaid programs are offered to people whose income is up to 150 percent of the federal poverty limit, and are funded through a state and federal matching program.

But Frommer has said that the "Medi-Cal hammer" is vital to ensure that drug companies offer real discounts to poor seniors and others who need prescription drugs. He dismissed the governor's approach as a "low-carb version of our plan."

Critics of the governor's plan argue that Schwarzenegger speaks often about leveraging the state's bulk purchasing power to secure discounts on other goods. But when it comes to using that leverage against pharmaceutical companies, the governor becomes timid.

Flanagan points out that the governor has received more than $367,000 from drug companies since taking office. "The governor doesn't want the free market when it comes to his campaign contributors," said Flanagan. Flanagan said he had been invited to the meeting this week, but did not attend because the governor's staff was "nowhere close" to where he was in terms of a bulk purchasing proposal.

While he has many harsh words for the governor's approach, Flanagan says he also has concerns about using Medi-Cal recipients as leverage to secure discounts. And while he supports the mandatory savings in the Frommer-Chan bills, he says the discounts should be made available to all Californians.

Flanagan would use the buying power of CalPERS, which currently buys drugs in bulk to receive discounts for its members. Under Flanagan's proposal, anyone could pay a $10 annual fee, and receive a discount card that would allow them to receive discounts on drugs at their local pharmacies.

Currently, he estimates that CalPERS leverages its bulk purchasing power to secure about a 20 percent discount for its members on drug purchases. "That number will only grow as the pool grows," he says. "As more people sign up, CalPERS will be able to use their leverage that much more." He says he expects to see discounts similar to the "30-70 percent discounts" Canadian citizens receive on drugs because the Canadian government buys in bulk.

While the sides remain far apart, Williams says he is still hoping to work out a negotiated compromise with the governor. "We've submitted our initiative to keep our options open," he said. "We'd still prefer to do this through the legislative process."

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